[ic] Re: Negative Tax - bug?

Dan Bergan danb at berganconsulting.com
Tue Oct 30 17:43:28 EST 2007


On 10/30/07, Mike Heins <mike at perusion.com> wrote:
> Quoting Dan Bergan (danb at berganconsulting.com):
> > On 10/30/07, Dan Bergan <danb at berganconsulting.com> wrote:
> > > On 10/30/07, Mike Heins <mike at perusion.com> wrote:
> > > > Quoting Dan Bergan (danb at berganconsulting.com):
> > > > > On 10/16/07, Dan Bergan <danb at berganconsulting.com> wrote:
> > > > > > I'm having an issue where negative sales tax amounts are computed.
> > > > > > The issue arises when there is a discount on the entire order, and the
> > > > > > products in the cart are nontaxable.
> > > > > >
> > > > > > A detailed description and potential solution is here:
> > > > > > http://www.icdevgroup.org/pipermail/interchange-users/2007-May/047410.html
> > > > > >
> > > > > > This issue was also found here (with no resolutions):
> > > > > > http://www.icdevgroup.org/pipermail/interchange-users/2005-September/043923.html
> > > > > >
> > > > > > Is this a bug?  It doesn't seem like a negative sales tax should be valid.
> > > > > >
> > > > >
> > > > > Back in May, Carl had what looks to be a good solution for this
> > > > > problem, which I am going to implement for my installation (see
> > > > > below).
> > > >
> > > > It is unclear if it should be a bug at all. If you wanted to implement
> > > > refunds, you would need negative tax.
> > > >
> > > > The bigger problem would seem to be the negative amounts.
> > > >
> > > > In any case, I have set up the ability to exclude negative tax
> > > > amounts with:
> > > >
> > > >         Pragma  no_negative_tax
> > > >
> > > > That is in the latest CVS.
> > > >
> > >
> > > Mike -
> > >
> > > Ahh... refunds -- I hadn't thought of that!  :-)
> > >
> > > For refunds, the taxable sales amount would be negative, so the tax
> > > would calculate as a negative.  In the case above (non-taxable
> > > products with a discount), the taxable amount should still be zero
> > > (not negative).
> > >
> > > I currently don't use Interchange for refunds, but that doesn't mean I
> > > never will!  So, I think I'll have to ponder this some more and dig
> > > deeper into the code.
> > >
> >
> > I think this might be more of a question about sales tax law.  Should
> > a ENTIRE_ORDER discount reduce the taxable amount?
>
> Without doubt.
>
> >
> > The only mention I have found when searching sales tax documents are
> > coupons for individual items, and percent off of all items.  In the
> > case of ENTIRE_ORDER the actual sale prices of the individual items do
> > not change, so my client reports that number to their state as the
> > taxable amount.  My client treats this type of discount like a gift
> > certificate -- it is applied after the tax is calculated.
>
> That is simply wrong. The user is over-paying taxes.

in Ohio, that may not be the case:
http://64.233.167.104/search?q=cache:sJHJL5Jp2KEJ:tax.ohio.gov/divisions/legal/documents/02ST_Opinion020004_TMZ.pdfl&hl=en&ct=clnk&cd=6&gl=us
(google cache of a tax commissioner judgment pdf...)


>
> > Of course, this is just my client, in one state and in the US.
> >
> > Would it work to have a catalog variable to determine if an
> > ENTIRE_ORDER discount should be applied pre-tax or post-tax?
>
> It won't ever be applied post-tax on my watch.
>
> If the order total is reduced, the tax is reduced. A gift-certificate
> is pre-purchased, and is paid for.
>
I haven't yet determined how Iowa (my client's state) applies their
law.  But, Connecticut's formula makes a lot of sense:
http://www.ct.gov/drs/cwp/view.asp?A=1529&Q=395904

The ENTIRE_ORDER discount is split proportionally among each item,
then each item's taxablility is determined to figure the total sales
tax.  This would fix the problem of a negative tax being calculated
for nontaxable items.  The consumer is neither overpaying nor
underpaying taxes.

Dan


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